Why Cash Conversion Is Key for Amazon Sellers During the Holidays
The holidays are a make-or-break time for Amazon sellers. This is the time of year most sellers make a huge chunk of their annual sales and lay the foundations for the coming year. But it’s also a time when things can get really tight, financially speaking. Opportunities abound, but in order to take advantage of them, you have to have a good handle on your cash flow.
With Amazon now holding onto your money for up to 28 days, the time between selling something and getting paid is getting longer for online sellers. Slow cash conversion limits your ability to take advantage of last-minute opportunities and reinvest in your business.
One of the most important things you can do to ensure a successful holiday season is to focus on your cash conversion cycle.
What Is Cash Conversion Cycle?
Your cash conversion cycle (CCC) is the amount of time it takes for you to convert your inventory into cash. In other words, it’s the difference between when you sell something and when you get paid. The shorter your CCC, the better off you’ll be. That’s because a shorter CCC means that you have less money tied up in inventory and receivables at any given time. This frees up cash that can be used to reinvest in your business, pay off debt, or fund other activities.
Pro-Tip: Instantly shorten your cash conversion cycle with faster payouts—and for free. Sellers with minimum $10,000 average monthly sales qualify can qualify in minutes to get continuous free cash flow this holiday season from Payability. Get started here.
The Problem with a Longer CCC During the Holidays
In the high-stakes arena of heightened customer demand and fierce competition among sellers on Amazon, an elongated CCC becomes perilous This extended cycle may deprive sellers of sufficient working capital to procure inventory and maintain seamless business operations. An extended CCC during the holidays can even spiral into a self-perpetuating downturn, amplifying the financial risks for Amazon businesses.
Waiting months to get paid by Amazon can pose this risk for sellers. It traditionally takes 28 days or more for third-party Amazon sellers to get paid—it can be even more depending on your account health and what Amazon ultimately holds in reserve. Imagine what you could be doing if you were turning over cash faster while demand for your products is peaking.
The Upward Spiral of Shorter Cash Conversion
When you get paid quickly for your products, you have continuous cash-on-hand to help you make the most of any opportunity. Your business is firing on all cylinders. You’re able to reinvest in inventory, double down on winning holiday ads, and maximize sales at the most critical time of year.
But this cash flow situation isn’t the reality for most Amazon sellers. The ecommerce giant itself only gives a select few sellers with outstanding marketplace account health early access to their earnings.
Luckily for sellers, services like Payability’s Free Access program are available, providing daily payments for Amazon earnings—so sellers wake up with yesterday’s shipped sales already in their account. The Free Access program is actually free too if you spend your payouts on the Payability Seller Visa Card associated with your account.
The Fastest, Easiest Way to Shorten Your CCC as a Seller
Imagine an upward cycle where you’re converting cash instantly and always have funds available from your Amazon sales. You are ready to jump on any opportunity in front of you. That’s how you go big during the holiday season— Skip Amazon’s 28-day payout window. Plus, with Payability, you’ll never have money stuck in your account level reserve. During the holidays, that means you’ll have cash-on-hand to take advantage of opportunities and avoid stockouts.
Conclusions for Sellers This Holiday Season
The holidays are a crucial time for online retailers to monitor their cash conversion cycles closely. It’s high stakes for Amazon sellers, who are typically left waiting weeks to get paid out for their sales.
A longer CCC driven by Amazon’s payout process can put a strain on businesses, tying up much-needed cash in inventory and receivables. One nearly magic solution for sellers is Payability, which offers daily working capital via early access to Amazon payments. Longterm, it means maintaining your account health to a tee and hoping Amazon selects you for their accelerated payment program.
So, if you want to make the most of year-end opportunity and start 2024 on the right foot, you’ll want to tighten up that cash conversion cycle leading into the holidays. Happy selling.